Chairman Ahmed Saeed after buying Boeing 777 aircraft: Now in trouble Neaver as he Paid the Generals .
By M A Siddiqui
KARACHI, November 10: The unraveling of the highly controversial four-year tenure of Pakistan’s International Airline’s Chairman, Choudhry Ahmed Saeed, began on Friday (Nov 5) when the center-piece of his management, retired Air Vice Marshal Niaz Hussain, a Deputy Managing Director, was forced to resign and quit unceremoniously.
“AVM Niaz’s sudden departure means Chairman Saeed has realized that he could no longer continue with the façade of projecting the PIA as a super airline, reaping billions in profits, when the reality was that the organization was sinking and was in deep trouble,” a former Managing Director of PIA said.
The removal of AVM Niaz went almost unnoticed in Pakistan as a two paragraph story in leading newspaper “Dawn”, buried somewhere inside, revealed Niaz was “asked to submit his resignation following reports of alleged financial irregularities during his tenure.”
The Dawn story could easily be described as the biggest under-statement of the year as with AVM Niaz busted, how anyone, in his right mind, could defend the PIA Chairman and his entire team of hand picked men for the billions they over-spent in four years and the millions they made for themselves, flying PIA into a bottomless financial pit.
The list of the “irregularities” committed in PIA under AVM Niaz, which means with direct approval and collusion with Chairman Ahmed Saeed, is endless and the entire Aviation Industry is wondering how AVM Niaz could be made the scapegoat by a Chairman who brought and used him all through their joint tenure.
Saeed and Niaz have brought the PIA to a point where they have made it a legal obligation for the Government to pay billions every year to not just keep the airline afloat but to keep the aircraft and assets from being taken over by creditors and foreign banks.
A former MD of PIA says in their tenure PIA has made so many expensive and unnecessary purchases, especially of aircraft bought with sovereign guarantees provided by the Government of Pakistan, that just paying the installments would be impossible unless Islamabad coughed out the hard cash.
The list is long. Saeed-Niaz got the Boeing 777s from US, all under the fake impression that PIA was purchasing them while in reality a middle offshore company was the real owner while PIA and Pakistan were going to pay.
PIA got Airbus A-310 on long 10-year lease with no purchase options when it could have easily opted for the 2-3 year lease options and if the financial health had improved the lease could have been extended.
PIA is now ready to buy replacements of Fokkers from Bombardier as the final deal which Chairman Saeed-Niaz wanted to make before they could ease themselves out, leaving PIA as the precious orphan in the lap of a helpless Government in Islamabad.
Besides the aircraft purchases, so many deals were done for all kinds of purchases the world aviation experts were wondering where the money was going to come from. PIA bought equipment, cabin seats each worth $50,000, new audio and video systems, engines, parts and whatever, in such a rush the internal Auditors of the airline have filled hundreds of pages with objections of all kinds.
“AVM Niaz’s sudden departure means Chairman Saeed has realized that he could no longer continue with the façade of projecting the PIA as a super airline, reaping billions in profits, when the reality was that the organization was sinking and was in deep trouble,” a former Managing Director of PIA said.
The removal of AVM Niaz went almost unnoticed in Pakistan as a two paragraph story in leading newspaper “Dawn”, buried somewhere inside, revealed Niaz was “asked to submit his resignation following reports of alleged financial irregularities during his tenure.”
The Dawn story could easily be described as the biggest under-statement of the year as with AVM Niaz busted, how anyone, in his right mind, could defend the PIA Chairman and his entire team of hand picked men for the billions they over-spent in four years and the millions they made for themselves, flying PIA into a bottomless financial pit.
The list of the “irregularities” committed in PIA under AVM Niaz, which means with direct approval and collusion with Chairman Ahmed Saeed, is endless and the entire Aviation Industry is wondering how AVM Niaz could be made the scapegoat by a Chairman who brought and used him all through their joint tenure.
Saeed and Niaz have brought the PIA to a point where they have made it a legal obligation for the Government to pay billions every year to not just keep the airline afloat but to keep the aircraft and assets from being taken over by creditors and foreign banks.
A former MD of PIA says in their tenure PIA has made so many expensive and unnecessary purchases, especially of aircraft bought with sovereign guarantees provided by the Government of Pakistan, that just paying the installments would be impossible unless Islamabad coughed out the hard cash.
The list is long. Saeed-Niaz got the Boeing 777s from US, all under the fake impression that PIA was purchasing them while in reality a middle offshore company was the real owner while PIA and Pakistan were going to pay.
PIA got Airbus A-310 on long 10-year lease with no purchase options when it could have easily opted for the 2-3 year lease options and if the financial health had improved the lease could have been extended.
PIA is now ready to buy replacements of Fokkers from Bombardier as the final deal which Chairman Saeed-Niaz wanted to make before they could ease themselves out, leaving PIA as the precious orphan in the lap of a helpless Government in Islamabad.
Besides the aircraft purchases, so many deals were done for all kinds of purchases the world aviation experts were wondering where the money was going to come from. PIA bought equipment, cabin seats each worth $50,000, new audio and video systems, engines, parts and whatever, in such a rush the internal Auditors of the airline have filled hundreds of pages with objections of all kinds.
“In our previous year’s management letter we mentioned that as a result of the reorganization, management of stores and spares, including their custody, procurement and physical inspection have been given to Director Engineering,” the Audit Report stated. “We consider that procurement and custody of stores and spares should not be under the executive who is responsible for consumption…We consider it as a serious weakness in the system…”
While Saeed and Niaz were busy in the orgy of purchasing, they were all the time bluffing General Musharraf and his junta with fantasy figures of billions of rupees of profits PIA was making, or going to make. Musharraf’s friend Brig (Retd) Niaz and Tariq Aziz were always there to support Chairman Ahmed Saeed. No one ever gave a serious look or thought to the great web of deception Saeed-Niaz had created, until the chicken started to come home to roost.
In the 3rd quarter of 2004, when PIA was supposed to have made a profit of over a billion, the company posted losses. That was just a symptom of the cancer which had been hidden under the “creative accounting” done under orders of Saeed.
“The 3rd quarter, between July and September is always the peak season for PIA as during the school and college holidays in US and Europe, Pakistanis travel home in droves. But if PIA is showing losses in such a busy period, how can it ever make money in slower periods,” a former PIA executive said.
The story of the imaginary profits of billions is also one which will keep aviation industry mystified for years. Just last year Saeed and Niaz convinced General Musharraf to pump in almost Rs 25 billion into PIA. That was on top of the guarantees the government had provided for purchases. The projections were that PIA would make profits of Rs 3-4 billion a year. Just in 2003 the projected profit was over Rs 4 billion.
According to an official announcement by PIA on October 26, 2004, “the January-September accounts of PIAC were also presented to the Board. These state an after tax profit of Rs1,013 million. The Board was informed that this profit is after absorbing an additional fuel bill of Rs3,657 million and the impact of rupee devaluation to the extent of Rs 705 million over the corresponding period last year.”
This was a typical example of the “creative accounting” which a former MD said was the current practice. “Chairman Saeed gives a profit figure to the Finance Department and they have to create all the numbers, working backwards, to reach that figure. The real story will emerge when Saeed quits.”
The other major scandal in which Saeed and Niaz used their connections with General Musharraf was to sell PIA shares in the Stock Market in April-July this year at Rs 20.05 a share.
Government investors were pressurized to buy these shares at that rate while the actual price would have been much less. To give a false boost to the share value, some of the institutional buyers were made to buy a lot. The result was that PIA off loaded bulk of its shares at Rs 20.05 in June-July, 2004. Within weeks the price has come down by 50 per cent and on November 8, 2004, the PIA stock was trading at the KSE at Rs 10.35 a share.
Millions have been lost in the bargain by individual investors and institutions which were forced by the Saeed-Niaz duo. Public protests have been going on against this scandal but to no result. On August 7, 2004 Daily Dawn published a letter from an Abu Dhabi investor who said: “Deceptive propaganda by some home-based organizations has time and again duped the common Pakistani of his hard earned money and this sorrowful phenomenon prevails unchecked despite various measures taken by the present government. One such example concerns none other than the national carrier, PIA, whose shares were open to the public last month at a base value of pak rupee 20.05 per share.”
Government investors were pressurized to buy these shares at that rate while the actual price would have been much less. To give a false boost to the share value, some of the institutional buyers were made to buy a lot. The result was that PIA off loaded bulk of its shares at Rs 20.05 in June-July, 2004. Within weeks the price has come down by 50 per cent and on November 8, 2004, the PIA stock was trading at the KSE at Rs 10.35 a share.
Millions have been lost in the bargain by individual investors and institutions which were forced by the Saeed-Niaz duo. Public protests have been going on against this scandal but to no result. On August 7, 2004 Daily Dawn published a letter from an Abu Dhabi investor who said: “Deceptive propaganda by some home-based organizations has time and again duped the common Pakistani of his hard earned money and this sorrowful phenomenon prevails unchecked despite various measures taken by the present government. One such example concerns none other than the national carrier, PIA, whose shares were open to the public last month at a base value of pak rupee 20.05 per share.”
The letter went on: “However, there is a continuous down trend in the value of these shares at the Karachi Stock Exchange and now it stands at Rs. 14.25, a slump of 30 per cent and that too even before the allocation of the shares to buyers. This is despite an interesting fact that KSE index has climbed to 6% during the same period. The Privatization Commission of Pakistan is headed by a thorough professional, Dr, Hafeez A. Shaikh, and it is time that he looked into the reasons for the continuous fall in PIA share value.” No one heard the woes of Iqbal Mahdi from Abu Dhabi. Click to Read Dawn letter
A highly placed source in PIA said the Chairman wasted almost $10 million in first setting up a Revenue Accounting System which would have given on-the-spot revenue updates on a daily basis and then discarding the system because it would have made it impossible to fudge the figures and resort to creative accounting.
“A new IT Director was appointed and a Johnny was picked up from a car show room to run the IT Directorate by paying him 10 times the salary he was getting. The 3rd Floor of the Cafeteria Building in Karachi was acquired months ago, over 200 computer terminals were set up and programs were purchased. A number of relatives and nephews of the Chairman benefited from the program but when it was supposed to deliver results, it was discarded and declared a non-starter as it would expose the real situation,” the source said.
To hide the facts and cover up their corruption and losses, the readily available excuse for Saeed and Niaz has been the increase in international oil prices. These fuel costs have hit every airline in the world and it was not unexpected. Every Board Room has been struggling to meet the challenge of these rising fuel costs and many have overcome it.
One comparable example is of Singapore Airlines which on October 28, 2004 reported a first half net profit of US$411 million despite adding US$122 million to its expenditures because of rising jet fuel prices. Click to see SIA announcement
Saeed and Niaz have been using the fuel price increase to befool the Generals in Rawalpindi while the fact is that PIA has been charging its passengers a special Fuel Surcharge to offset the increases. “They would never disclose how much impact was absorbed by the surcharge and they would never say why they failed to meet the challenge like other airlines by cutting costs, raising passenger revenues, buying less and better management,” says the former MD.
The ultimate result is that PIA is now making losses instead of the billions it was supposed to earn to pay for the purchase of the B-777 and other aircraft, the Government is bound to make these payments from its foreign exchange reserves as it has provided sovereign guarantees and in case of a default the entire PIA fleet would be taken over by banks and off shore companies.
Seeing this end coming, Chairman Saeed has now moved to make AVM Niaz a scapegoat. PIA sources say this has been done just in time to ease him out in preparation for an end December move by Saeed himself to quit the job and move out.
But Saeed cannot get away with putting the blame on AVM Niaz alone. Niaz has been Saeed’s own front man and creation. This DMD, one of the many now crawling all over the airline, was recruited by Saeed as Director Engineering in 2001, not because he fit the job description, but because he was recommended by one Brigadier Niaz, the buddy and Bridge partner of the country’s president, General Musharraf.
Yet when AVM Niaz Hussain was appointed Director Engineering on July 9, 2001, on a four-year contract in violation of Government rules, no approval had been sought about his professional and technical expertise from the Civil Aviation Authority (CAA) of Pakistan. But as the formality had to be completed, Saeed sent a brief letter almost 3 weeks later to the CAA Director General, stating that: “He possesses vast experience in Aviation field and has been judged to be the most suitable for this position.” Click to see MD’s Letter to CAA
The CAA was not amused. Within two weeks, precisely on August 15, 2001, the CAA hit back with a terse response which left no doubt that AVM Niaz Hussain did not possess the required qualifications and experience.
“The appointment of AVM (R) Niaz Hussain, as Director Engineering, has already been made with effect from 9th July, 2001, without obtaining prior “Approval” as per prescribed requirements,” the Director Airworthiness of CAA, Engineer Zafarullah Khan, said in his letter to the PIA MD.Click to See CAA Letter
But since AVM Niaz was the chosen one, and obviously CAA had been pressurized by General Musharraf and his men, it could not withhold the approval. So Engineer Zafarullah went on in his letter, clearly indicating that the decision was being taken under obvious duress: “The competent authority has ‘Approved’ his appointment as a ‘special case’, although the incumbent does not meet the specified qualifications/experience requirements for the assigned position.”Click to see document showing needed qualifications | Click to see record/qualifications of AVM Niaz
As another sign of annoyance, the CAA sent the ‘approval’ for only six months, saying after that period his performance should be assessed. It was never done as neither the PIA Chairman, nor the CAA bothered to reopen the case.
The PIA Chairman, who has now swiftly accepted the “forced” resignation of AVM Niaz, could care less at that time, as he had his man in the job and was soon to give him vast financial and administrative powers. AVM Niaz had been inducted as Director Engineering though he did not possess the required qualifications. Soon he was handed over the real task for which he was the chosen one --- purchases of PIA, running into hundreds of millions of dollars of borrowed money, consuming over 60 per cent of the PIA budget.
He was also soon to be promoted as Deputy Managing Director in charge of all PIA Operations, a huge job when combined with all the purchases.
No wonder, records obtained by the SA Tribune revealed, AVM Niaz was soon globe trotting and out of 365 days in a year he was on official purchasing tours abroad for 200 days. Keep counting the expenses and the allowances in high cost foreign capitals. Multi billion dollar deals were being made despite repeated objections by the 12-member Board of Directors of PIA which has some private sector members as well. But no one would bother as long they had powerful uniformed friends in the GHQ and Islamabad.
AVM Niaz had come to PIA from the Pakistan Air Force and he had built up his reputation as a very corrupt man in his latest posting at the PAF Kamra Complex, located between Peshawar and Islamabad. He had acquired the nick name of “The Wizard of Kamra” because of his worldly wining, dining and womanizing ways.
In a remarkable discussion in the SA Tribune Forum on a story on kickbacks in PAF, several Kamra insiders posted messages revealing what AVM Niaz had been doing there. “AVM is the most corrupt engineer PAF has ever produced .The monthly bill of his wine drinking is more than Rs. 50,000,” wrote one PAF officer.
Added another: “The harm AVM has done to PAF is not only financial but of security too. He got all the business of PAF (transferred) to Transsworld and got his son employed there. Transsworld have all Indian employees in Dubai and who knows what they are up to. Some ex-PAF officers are also working hands in hands with them.”
His resignation last Friday for financial irregularities proved all this may be right. But will he be allowed to get away with the crime and the booty?
Source: http://antisystemic.org/satribune/www.satribune.com/archives/nov04/P1_mas.htm
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